Marian Tankersley, et al v. John R. Lynch

The opinion of the court was delivered by: Howard R. Lloyd United States Magistrate Judge

** E-filed May 9, 2011 **

NOT FOR CITATION

United States District Court For the Northern District of California

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' 13 COMPLAINT

[Re: Docket No. 14]

BACKGROUND

In April 2007, California residents Marian Tankersley ("Tankersley") and Richard Diehl ("Diehl") (collectively, "Plaintiffs") purchased a franchise and three exclusive territories from 19 Collision on Wheels International, LLC ("CoW"), a Michigan-based seller of mobile auto body 20 repair system franchises. Docket No. 1, Ex. A ("Compl.") ¶¶ 1, 2, 8. Their decision to do so was 21 based in part on information found in CoW's Uniform Franchise Offering Circular ("UFOC"), 22 which contains certain disclosures to potential franchisees and which CoW provided to Plaintiffs the 23 month before. Id. ¶¶ 7, 19, 25. 24

Plaintiffs allege that the UFOC upon which they relied contained misstatements and 25 omissions of material fact and that they have been harmed as a result. Id. ¶¶ 18, 21, 24, 26. They 26 filed suit against Michigan residents John Lynch ("Lynch"), Gregory Longe ("Longe"), Gregory Mancina ("Mancina"), Louis Maio ("Maio"), and Richard Bass ("Bass") (collectively, 28 "Defendants"), all of whom are officers or employees of CoW, for violations of Michigan franchise 2 law. Id. ¶¶ 2-6.

4 complaint on the ground that this Court does have not have personal jurisdiction over Defendants.

20 resident defendant if the defendant has "minimum contacts" with California such that maintenance 21 of the suit "does not offend traditional notions of fair play and substantial justice." Data Disc, 557 22 F.2d at 1287 (citing International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). "If the 23 nonresident defendant's contacts within [California] are 'substantial' or 'continuous and 24 systematic,'" the defendant is subject to general jurisdiction in California even if the cause of action 25 is not related to the defendant's activities within the state. Data Disc, 557 F.2d at 1287. "If the 26 defendant's activities within the state are not so pervasive as to subject it to general jurisdiction, it 27

Defendants removed this action from California state court and moved to dismiss Plaintiffs'

LEGAL STANDARD

"When a nonresident defendant raises a challenge to personal jurisdiction, the plaintiff bears

A federal district court sitting in California may exercise personal jurisdiction over a non-

may be subject to specific jurisdiction." Toyz, 2010 WL 334475, at *6. "The Court may subject a 2 defendant to specific jurisdiction if the defendant's contacts with the forum satisfy the following 3 three-prong test: 4

(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by

which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;

(2) the claim must be one which arises out of or relates to the defendant's forum-

related activities; and

(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.

While these facts might subject CoW to this Court's general jurisdiction, they certainly do not subject the individual Defendants to it. Each of Defendants are Michigan residents who appear 23 to lack "substantial" or "continuous and systematic" ties to California. See Docket Nos. 15-19. As 24 discussed below, Plaintiffs' allegations that Defendants participated in the sale of Plaintiffs' 25 franchise are important with respect to determining whether specific jurisdiction exists, but they do 26 not support the exercise of general jurisdiction. 27

As for the first prong, Plaintiffs must establish purposeful availment of or purposeful Food Co., Inc. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002); and Ziegler v. Indian River County, 14 "Demonstration of purposeful direction 'usually consists of evidence of the defendant's

CoW and that the fiduciary shield doctrine does not allow personal jurisdiction over Defendants 13 unless there is a reason to disregard the corporate form. It is true that "[u]nder the fiduciary shield 14 doctrine, a person's mere association with a corporation that causes injury in the forum state is not 15 sufficient in itself to permit that forum to assert jurisdiction over the person." Davis v. Metro Prod. 16

authorizes or directs or in which he participates, notwithstanding that he acted as an agent of the 24 corporation and not on his own behalf." Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co., 173 25

"A corporate officer or director is, in general, personally liable for all torts which he

F.3d 725, 734 (9th Cir. 1999). "However, mere knowledge of tortious conduct by the corporation is 26 not enough to hold a director or officer liable for the torts of the corporation absent other 2

'unreasonable participation' in the unlawful conduct by the individual." Wolf Designs, 322 3

"Cases which have found personal liability on the part of corporate officers have typically involved 5 instances where the defendant was the 'guiding spirit' behind the wrongful conduct, . . . or the 6

Plaintiffs do not allege an alter ego theory, so the Court must determine if Defendants were "guiding 8 spirits" in the alleged wrongdoing directed at Plaintiffs in California. 9

It is a close call. It appears that several of Defendants communicated with Plaintiffs about their purchase of a franchise in California, but it is unclear whether Plaintiffs or Defendants initiated

these discussions. And while Defendants' conference calls were attended by prospective franchisees from many different states (including California), these calls were not specific to California. Further, 13 although some Defendants may have helped Plaintiffs determine whether purchasing a franchise 14 was right for them, no Defendants ever went to California to assist them in this regard. In fact, 15

Other courts have found that personal jurisdiction is lacking in similar, though not identical, 17 circumstances. See Toyz, 2010 WL 334475, at *6-10 (concluding in a franchise dispute that 18

California Plaintiffs did not meet their burden to show that Michigan defendants had minimum 19 contacts within the state and that exercising personal jurisdiction would be unreasonable); see also 20

*5-7 (C.D. Cal. May 4, 2006). 22

23 they do), Defendants meet their burden on the third one: whether the exercise of jurisdiction is 24 reasonable. In this Circuit, a court must look to seven factors that are relevant to this determination: 25

"(1) the extent of the [defendant's] purposeful interjection into the forum state's affairs; (2) the 26 burden on the defendant of defending in the forum; (3) the extent of conflict with the sovereignty of 27 the defendant's state; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient 28 judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in

Plaintiffs, along with other prospective franchisees, had to go to Michigan to gain more information. 16

[purposeful availment prong], the degree of interjection is a factor to be weighed in assessing the 5 overall reasonableness of jurisdiction under the [reasonableness prong]." Core-Vent Corp. v. Nobel 6

As for the first factor, "[e]ven if there is sufficient 'interjection' into the state to satisfy the Industries, 11 F.3d 1482, 1488 (9th Cir. 1993) (brackets in original) (quoting Insurance Company of 7

Marquez, 942 F.2d 617, 623 (9th Cir. 1991) (degree of interjection analysis and purposeful 9 availment inquiry redundant). As explained above, it is a close call as to whether Defendants' 10 purposefully availed themselves of the privilege of conducting business in California at all, so this

factor weights in favor of them.

As for the second factor, "[w]here burdens are equal, this factor tips in favor of the

13 defendants because the law of personal jurisdiction is 'primarily concerned with the defendant's 14 burden.'" Ziegler, 64 F.3d at 475 (citations omitted). While Plaintiffs live and work in California, 15

Defendants all live and work in Michigan. Thus, the burden on Defendants to litigate in California 16 is, at the very least, equal to that of Plaintiffs. In this situation, this factor tips in favor of 17

As for the third and fourth factors, exercising personal jurisdiction
over Defendants would
not conflict with the sovereignty of Michigan. California also has
an interest in adjudicating a 20 dispute when the alleged injuries to
a plaintiff occur in California. Brand v. Menlove Dodge, 796
21

As for the fifth factor, the Ninth Circuit has "looked primarily at where the witnesses and the

23 evidence are likely to be located." Core-Vent, 11 F.3d at 1489 (citation omitted). Here, Plaintiffs are 24 located in California, and Defendants are located in Michigan. Other current or former employees of 25

CoW would likely be located in Michigan as well, and other prospective franchisees who also may 26 have attended conference calls or events could be located in any number of states. In these 27 circumstances, this factor weighs in favor of Defendants. 28

Court nor our court has given much weight to inconvenience to the plaintiff." Ziegler, 64 F.3d at 4

476 (citing Core-Vent, 11 F.3d at 1490). Moreover, Plaintiffs can obtain the same relief in Michigan 5 that they could in this Court. In fact, Plaintiffs have already engaged in arbitration with CoW in 6

Michigan, so Plaintiffs have already pursued remedies in that state.*fn3 These factors favor Defendants. 7

Looking at all of the factors, the Court concludes that the exercise of personal jurisdiction

8 over Defendants would be unreasonable given the minimal extent to which Defendants have 9 injected themselves into California (if at all) and the greater judicial efficiency of having the matter 10 heard in the state where the majority of parties and potential witnesses are located. Accordingly, the

Court concludes that it lacks personal jurisdiction over Defendants.

CONCLUSION

Based on the foregoing, Defendants' motion to dismiss is GRANTED. Plaintiffs' complaint 14 is dismissed with prejudice. The Clerk of the Court shall close the file. 15 16

See General Order 45 Section IX C.2 and D; Notice has NOT been electronically mailed to: 6

Charles Godfrey Miller Bartko Zankel Tarrant & Miller 7

A Professional Corporation 900 Front Street 8

Suite 300 San Francisco, CA 94111 9

2

Counsel are responsible for distributing copies of this document to co-counsel who have not

10

registered for e-filing under the court's CM/ECF program.

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United States District Court

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For the Northern District of California

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